I was recently asked to provide a quote for the formation of a new limited company for a client. I enquired about the proposed company directors, shareholders, registered office, nature of the trade etc . I then provided some advice on a tax efficient share structure and quoted my fee for forming the company, dealing with the share issues, appointing the company officials registering the company with HM Revenue and Customs etc.
How much? Came the reply, but we can buy a company on line for less than £30.
Now, I don’t doubt that this is true. Type company formation into Google and no end of company formation agents websites come up offering company’s for as little as £19.99.
However the story doesn’t really end with the purchase of the shell company and in my opinion any newly incorporated business needs to look beyond the short term cost saving that comes about as a result of buying a cheap company. For example, from the off you need to establish the best and most appropriate way for the shares in that company to be held as this will aid in tax efficient extraction of profits from the company – a simple exercise that could (based on £70,000 of post tax profits) save over £8,000 in higher rate taxes each year.
When I explained the above (plus more implications of company formation) the fee for my service of £350 was agreed without hesitation.
Don’t get me wrong, a cost effective company formation is what all new business owners are after, and in some cases maybe a £20 company is the right move, however in the main a few extra pounds initially could save hundreds or even thousands later.
Tim Pearce
Director
Crump Pearce & Co Limited
Chartered Certified Accountants
43 Merstow Green
Evesham
Worcestershire
WR11 4BB
01386 49999
The above article is not meant in any way to cause offence to any online or other company formation agent. Additionaly the figures in this post could vary dependant on other income and a persons individual situation. Advice should always be sought from a professional. Crump Pearce accepts no liability for any loss caused from using this information.
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Tags: Accountant, planning, Tax
Nice article. And I bet you have your fair share of clients who decide to form a company, maybe trade a little, perhaps even go past a year end, and THEN decide to get some advice. At this point, it’s all about (a) damage limitation, (b) planning for the future, and (c) admitting to learning from past mistakes!